Demand for commercial office space expected to rise in 2014
It is estimated that the demand for commercial office space across seven major Indian cities will touch 160 million sq. ft. by 2014. It is expected that the demand will mostly be concentrated in the metro cities of National Capital Region, Mumbai and Bangalore. However, it is also estimated that besides Bangalore, the supply of commercial space will outstrip the demand.
Contrast compared to 2013
This is in stark contrast to the situation that was prevalent in 2013. Incidentally, less that 3 million sq. ft. of office space was taken up in Q3 2013. This is a drop of more than 75% compared to the fresh office space supply of 10 million sq. ft. during the previous quarter and nearly 50% compared to the corresponding period last year. There was an increase of 8% in Q2 2013 as compared to the previous quarter and an increase of 16% compared to the corresponding period of the previous year. This was mainly due to delayed deliveries during previous quarters and new projects coming up.
Demand across cities:
The demand for commercial space in the Delhi NCR will be about 32 million sq. ft. in 2014. The actual availability is expected to be about 42 million sq. ft. In Mumbai, the supply of commercial space is expected to outstrip the demand. The supply here is expected to be about 52 million sq. ft., while the demand of only about 32 million sq. ft. In Chennai, the supply is expected to be about 30 million sq. ft. against the demand of 20 million sq. ft. In Kolkata, the demand and supply are likely to be even at about 12 million sq. ft.
In Bangalore, the demand for office space is likely to exceed the supply in 2014. While the demand is pegged to be about 36 million sq. ft., the supply expected is only about 32 million sq. ft. It is estimated that the demand for commercial space would be about 160 million sq. ft. by 2014. This would include a Compound Annual Growth Rate (CAGR) of about 6%. The CAGR of Hyderabad is expected to be about 12% in the same period. It is estimated that the cumulative demand for office space would be about 18 million sq. ft. This would result in Hyderabad becoming the second highest growth center for office space demand in the last four years.
Future prospects:
This growth in demand for commercial space is set to get further accentuated in the coming years. To cater to this rising demand, there is expected to be a fresh supply of about 140 million commercial space by 2017. Incidentally, the commercial realty sector has witnessed a humongous growth of about 800% in the last decade which is expected to continue in the future. Delhi NCR and Mumbai are expected to have considerable new supply of commercial space due to the large number of commercial projects coming up in these cities. Other cities like Bangalore, Hyderabad, Pune and Kolkata are expected to follow suit.
Noida and Gurgaon are two regions of the country which has tremendous prospects of new office space supply coming up in the near future. Bangalore is also likely to see large supply of commercial space, which is expected to be lapped up by the IT sector. The financial year 2014-15 is expected to see considerable supply of commercial space due to the large number of new projects coming up across all major cities. Besides, there is expected to be considerable supply of office space in Tier-II and Tier-III cities due to the huge potential for commercial development in such cities.
